City not liable for takings, but may be for proprietary acts causing electrical line fire says Austin Court of Appeals

The City of Austin d/b/a Austin Energy v. Liberty Mutual Insurance, et al  03-13-00551-CV (Tex. App. – Austin, May 16, 2014).

This is an interlocutory appeal in an inverse-condemnation and TTCA case where the trial court denied the City’s Rule 91a motion (Rule allowing dismissal for baseless claims). Since the City’s asserted entitlement to a “baseless” challenge is jurisdiction, the appellate court has interlocutory jurisdiction. The Austin Court of Appeals affirmed in part and reversed in part.

A wildfire damaged numerous homes and caused injuries. The owners and insurance companies (through subrogation) brought a suit alleging essentially that the City started the fire when the electric utility’s overhead distribution lines came in contact with each other during high winds. They brought inverse-condemnation, negligence, and trespass. The factual allegations center on the City’s decision, for cost savings, to go from a regular inspection of lines to a repair-as-needed policy. The City filed a Rule 91a motion for baseless claims. The City asserted the petitions did not sufficiently allege the “intent” and “public use” elements required for a taking, their actions were governmental not proprietary, no proper charter notice was provided and it retains immunity. The trial court denied the motion and the City appealed.

The appellate court noted in a footnote that this is at heart a plea to the jurisdiction and it would analyze the case as such. Under a takings analysis a party must allege that the governmental entity intended the resulting damage, or at least knew that the damage was substantially certain to occur, not merely it intended the act. This is a question of law. The court concluded the pleadings do not reasonably support a conclusion the fire and damage was substantially certain to occur. The facts, at best, show “that the City’s conduct furnished a condition that made property damage a substantial risk. That is far different, however, from being the substantial certainty required for a valid takings claim.” It also noted the pleadings do not support a conclusion the property was damaged for “public use.”  The court then analyzed the City’s immunity under the Texas Tort Claims Act (“TTCA”) for the activities alleged. The City asserted that while a public utility operation is proprietary, its sub-acts of fire prevention and engineering decisions are still protected and attempted to establish this by using the TTCA chapter architecture.  After analyzing the arguments and TTCA, the court determined the activities complained of were proprietary so no governmental immunity applies.

With regards to charter notice, the court held if the City had immunity from suit, the notice is jurisdictional.  If it does not, then the charter notice cannot confer immunity from suit and is nothing more than a liability defense. [Comment: The part I do not like about this analysis is the court’s holding that a charter notice provision is not a statutory notice provision so does not count for TTCA purposes. Further, the charter notice provision does not expressly state it must be given before suit is filed so it is not a “prerequisite.”    These are incorrect in my view and contrary to other case law. The case result does not turn on this language, but it can be improperly used against entities if quoted.]

If you would like to read this opinion click here. Panel: Chief Justice Jones, Justice Pemberton, and Justice Rose.  Opinion by Chief Justice Jones. The attorneys listed for the numerous parties can be found on the docket page located here.